Spring 2021 - California Mortgage Association
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Elizabeth Knight – President PLM Lender Services, Inc. A P u b l i c a t i o n o f t h e C a l i f o r n i a M o r tg a g e A s s o c i a t i o n Michelle Rodriguez – Vice President R.C. Temme Corporation Richard Wachter – Secretary Wachter Investments, Inc. Inside This Issue From the President...................................................................... 2 Richard Selzer – Treasurer Selzer Home Loans From the Editor............................................................................ 3 David Herzer – Immediate Past President Herzer Financial Services, Inc. Sacramento Summary................................................................ 5 Steve Belleville Odell Murry A “Wyatt” Standard for Insurance Brokers?............................ 7 Real Estate Lending Group, Inc. MAI Financial Services, Inc. Mark Forbes James Perry Can Private Money Fuel the Recovery Once Again?...........11 F.E. Forbes Company, Inc. Alliance Portfolio Noah Furie Lori Randich Am I a “Debt Buyer?” Understanding the New Budget Mortgage Corporation Bay Laurel Financial Wave of Debt Buyer Statutes and Their Impact Angelica Gardner Stephen Rexrode on Servicing Non-Performing Mortgage Debt................... 13 Asher Evan Investments Cushman Rexrode Capital Corporation Summer Seminar Save-the-Date............................................16 Joffrey Long Southwestern Mortgage Pam Sosa Standard Mortgage Financial Spring and Annual Sponsors................................................... 17 Sandy MacDougall Services, Inc. Mortgage Vintage, Inc. Shafiq Taymuree PAC Contributors........................................................................22 Stonecrest Got Solar? Questions to Ask When Underwriting a Home with Solar Power...............................24 Michael Arnold & Michael Belote, Esq. Legislative Advocates MEMBER SPOTLIGHT: Donald Hensel....................................26 T. Robert Finlay Legal Counsel Stricktly Strickland.....................................................................28 Membership Application......................................................... 31 CMA HEADQUARTERS STAFF Jennifer Blevins, CMP Michael Cochran is published by the California Director of Management Services Webmaster / IT Manager Mortgage Association, a voluntary trade association serving California mortgage and trust deed brokers Teresa Excinia, MBA Stephanie Schoen and lenders. Executive Director Special Projects John Berkowitz Tricia Schrum, CPA 2520 Venture Oaks Way, Suite 150 Publications Director Accounting Sacramento, CA 95833 (916) 239-4080 – phone • (916) 924-7323 – fax Jen Gross, CMP Natalie Sinclair cma@camgmt.com Meeting Planner Special Projects www.californiamortgageassociation.com Spring 2021 Page 1
Elizabeth M. Knight 2020-2021 CMA President hope as of this writing you are all members perform many or all of these as much due diligence as I normally do? doing well; taking time to be with your functions themselves. Could any of you Why did I step outside my knowledge base families, taking time to take care of imagine simply performing one function without further review or consult on this yourself, staying healthy and enhancing all day, every day? For the entrepreneurial loan?” Maybe it is because we want a bit of and protecting your businesses from the CMA members, it would be a “roller coaster the shrieking highs and lows of any great ongoing changes to the market and the on a flat track.” roller coaster to rise to the precipice, free enactment of new legislation. fall and then soar again. As I had mentioned in the last Points of Currently, the real estate market is, in Interest President’s message, I enjoy sharing many areas, rising in value very quickly. quotes from famous people. This edition’s Properties that sold last month for quote best described my thoughts about $1,250,000 are now selling for $1,450,000. CMA as a group since we are strong and We are seeing not just multiple offers bold: but unprecedented numbers of multiple offers causing offers to exceed list price Yeah, life is complicated, by as much as 10%, maybe more in some areas. I was talking to one agent who had but if it wasn’t complicated, 85 offers come in on one property and it would be a roller coaster the final accepted offer exceeded the list price by 12%, all cash, and, the original list on a flat track. Wouldn’t be price was at market. There are four driving a ride worth taking. forces that create such an occurrence: Low – Suspense writer Dean Koonz inventory, low interest rates, people who feel they need to jump into the market, Many of the CMA members consist of small people with cash. enterprises which allow (or make) the Sometimes, although we ride a roller owners to perform and perfect so many coaster ride every day, we want to make it But, as any of us know who have been in different functions of their business. Where wilder than it already is. Perhaps, it is not a this business many years, this is a cyclical a large company has a team of loan officers, conscious choice. It is just something that market and every time there is a downward processors, underwriters, loan committees wants us to feel bolder, more creative, just adjustment in the market it follows an for different types of loans, funders, closers, ... more. But, when looking back, we think accelerated uptick. My message here post-close auditors, HR teams, accounting “What was I thinking? Why did I work with today is to be especially cautious when departments, marketing departments and that borrower? Why did I let them push me a myriad of other departments, our CMA into closing so quickly without performing continued on page 29 Page 2 Spring 2021
Mayumi Bowers Editor, pring has arrived which means new life, fresh starts, and As we progress through this year, I suspect that there is going to new opportunities. We can all agree that 2020 was a be a lot of change ahead in many aspects of our industry due to challenging year for a multitude of reasons. But 2021 is legislation, the economy, and of course the ever-lingering effects a new year with what looks like the promise of getting back to of Covid-19 but I am optimist that these changes, whatever they something that looks like normal again. may be, won’t come as a jolt but a gradual change (just like the changes of the seasons). It’s a time to let the spring showers rinse away all of the frustrations and feed the new seeds of opportunity. The economy is picking In this edition, we focus on a couple of those gradual changes back up as things open back up, the vaccine is being distributed, that may touch your business. and hope springs eternal. Spring 2021 Page 3
By Michael J. Arnold & Michael D. Belote, Esq. CMA Legislative Advocates Real Estate Issues Front and Center For 2021 f the analogy was to a horse race, we evictions and foreclosures for example, of housing needs, zoning, CEQA, finance, might say that the California Legislature a budget trailer bill already has been and many others. is “off and running” for 2021, the first year enacted extending eviction protections of the new 2021-2022 session. During the until summer. Legislators believe, correctly Third, Governor Newsom and the pandemic, however, we really should say or incorrectly, that an unlawful detainer legislature are concerned about wildfires that the state Senate and Assembly are tsunami will occur when the moratorium and homeowners insurance availability. “off and limping” to begin the legislative ends. Foreclosures are a good deal more As this column is written, the legislature is year, as 2021 is beginning in the same nuanced, in that foreclosure rates are not considering a budget trailer bill allocating remote fashion as last year. To be clear, rising significantly, forbearances largely over $500 million for wildfire costs and the legislative process does not function seem available for those affected by the prevention, including home hardening. well in a remote environment: in a recent pandemic, and property owners still Obviously nothing could derail a healthy hearing on evictions, an overwhelmed have equity, because of the increases in real estate market faster than the inability AT&T conference operator attempted home values. But with the recent CFPB to obtain homeowner’s insurance, so this gamely to shepherd nearly 1000 landlords proposal on foreclosures, it is likely that too is a big issue. and tenants wishing to testify on a bill. The California legislators will want to visit the result was exactly what would be expected, issue this year. Beyond these mega-issues, CMA is also with barking dogs, crying babies, bad involved in numerous individual bills, connections, disconnections, drunk callers, A second key issue with ramifications including the following: abusive callers, and even people calling in for CMA members is housing and on the wrong bill. homelessness. Of the over 2500 discreet • SB 373: Economic Abuse pieces of legislation introduced for 2021, Would prohibit collection activities It turns out that legislating and lobbying literally hundreds relate to housing in in situations where various persons is both more effective and more efficient some fashion. Given the personal interest specified in the bill opine that the when done in-person. Who knew? But of Senate President Pro Tem Toni Atkins in debt is the result of “economic abuse,” in contrast to restaurants and baseball the housing shortage, it is very likely that broadly defined to include, among games, which might be able to function legislation will be enacted this year. But other circumstances, defrauding the with reduced capacity, the Capitol pretty housing has proven to be a veritable Rubik’s debtor of money or assets, in the much has to be either open or closed. Cube of complexity in the past, because provision of products and services. Because the building cannot accommodate of the multiplicity of interests involved, Real property-secured loans are not unlimited visitors in the near-term, the including local governments, NIMBYs, exempt. remote environment is likely to continue YIMBYs, lawyers, labor, environmentalists, for some time. builders, and more. Probably every subject involving the creation of housing is the Several of the key issues of particular focus subject of bills this year, including such this year have implications for CMA. On disparate topics as local fair allocations continued on page 29 Spring 2021 Page 5
Mayumi Bowers Vintage Mortgage, Inc. A “Wyatt” Standard for Insurance Brokers? n November of 1966, Joseph and Clarice Wyatt walked into the Stockton office of Union Home Mortgage to borrow $2,500. They had no idea that the loan(s) they would get, and the ultimate litigation, would be referenced in numerous lawsuits against brokers, well into the next century. Union, as a broker, failed to draw Wyatt’s Basically, Murray sued the insurance broker attention to specific, unfavorable clauses for failing to make the insurance policy in the loan, allegedly “breaching their understandable. (Can insurance brokers fiduciary duty.” They were found, among really do that?) The policy he purchased other allegations, to have engaged in a didn’t even cover the ultimate loss against “conspiracy” against the borrower. The case which he sought to be insured. is often referenced in litigation, to indicate a broker’s duty to look out for the interests The decision considered that the broker, of the borrower. (UPS) held themselves out as specializing in the type of insurance purchased by Murray. Punitive damages were awarded against the broker – $200,000. That was “a lot of In lawsuits against mortgage brokers, Wyatt money” in 1979, the year the broker lost v. Union Home Mortgage is cited in at least their appeal. one out of three cases. It’s interesting to see Murry v. UPS as the “Wyatt” of insurance In the world of insurance brokerage, a new brokerage. More important to us, it may decision, Murray v. UPS Capital Management, help expand our understanding of the seems to impose a “Wyatt-like” duty on insurance brokers. continued on page 8 Spring 2021 Page 7
Wyatt – continued from page 7 standards imposed by Wyatt, something Murray believed he purchased appropriate That same day, Tokio Marine America we should all be aware of. insurance to cover the loss, but the insurance Insurance Company (Tokio) issued a Marine company denied his claim. Certificate of Insurance (Certificate), which Consider Googling Wyatt v. Union Home Murray believed fully insured the shipment Mortgage. Reading the first eight or so Murray sued his insurance broker, UPS Capital in the event of any loss or damage by paragraphs will give you a good overview Insurance Agency (UPS Capital), for breach UPS. The Certificate contained a Free of the issues. of contract and negligence. He asserted UPS From Particular Average (FPA) provision, Capital owed him a special duty to make the providing a limitation on coverage. An interesting note, one of the attorneys in insurance policy language understandable to the appellate case was Bruce H. Newman, an ordinary person and to explain the scope At some point during the shipment to who was the original General Counsel for of coverage. The court granted UPS Capital Texas, UPS damaged the equipment and CMA (before Phillip M. Adleson and now, summary judgment after concluding there Murray submitted a $36,666.85 claim. Robert Finlay). was no heightened duty of care and dismissed Tokio rejected the claim on the grounds Murray’s lawsuit. the coverage Murray purchased did not A special thanks to Attorney Craig Forry, cover the loss. Specifically, Tokio argued of Forry Law, author of the following On appeal, Murray asked to create a new rule the Certificate’s FPA provision did not apply article about Murry v. UPS Capital Insurance that brokers/agents, specializing in a specific to the shipping damages. Agency, Inc. He was kind enough to allow field of insurance, who hold themselves out us to provide his article along with this as experts, are subject to a heightened duty introduction. I’m fortunate to be on Mr. of care towards clients seeking that particular Forry’s e-mail list (www.ForryLaw.com). kind of insurance. The appellate court declined the invitation to create a per se rule; however, it reversed the judgment and remanded the matter, and in doing so confirmed some basic principles of liability for insurance brokers/agents. Murray later learned the policy covered only catastrophic losses such as the entire destruction of the vehicle in which the shipment was carried by UPS, and not damage caused by factors other than a Forry Article catastrophic loss such as mishandling the freight or other causes. Introduction In the recent decision in Murray v. UPS Murray sued UPS Capital, and his negligence Capital Insurance Agency, Inc., the California claim was based on the premise UPS Capital appellate court reversed the trial court’s owed a special duty to the public and to granting of summary judgment, and Murray to exercise reasonable care in its remanded the action for a jury trial, because dealings including a duty of disclosure to Murray raised triable issues of fact as to inform Murray of the products available whether UPS Capital undertook a special to cover in-transit cargo loss and damage duty by holding itself out as having expertise In 2018, Murray contacted UPS Capital in the absence of a catastrophic loss and in inland marine insurance, and Murray and requested insurance coverage for a further to fully explain technical provisions reasonably relied on its expertise. shipment that same day from California such as the FPA provision. to Texas. He completed UPS Capital’s form Murray purchased used computer equipment application for a house policy coverage and Murray maintained UPS Capital breached its worth nearly $40,000, which was damaged paid $350. On the form, Murray described duty of care by failing to fully explain the FPA by the United Postal Service (UPS) while it was the shipment as used computer equipment being transported from California to Texas. valued at $37,000. continued on page 9 Page 8 Spring 2021
Wyatt – continued from page 8 provision in the Certificate, by not disclosing available and/or explain the limitations of limited coverage available to ship his used other available insurance products to FPA coverage. goods with UPS. Murray, and by not giving Murray the opportunity to purchase insurance that The appellate court found no published As a general rule, an insurance agent would cover loss or damage caused by cases on the issue of whether insurance assumes only those duties found in any factors other than a catastrophic loss. brokers, selling one kind of policy, agency relationship such as reasonable automatically assume additional duties care, diligence, and judgment in procuring Murray argued an insurance agent may simply because they are specialists, the insurance requested by an insured. assume additional duties by an express implicitly holding themselves out as having agreement or holding itself out as being a expertise in that given field of insurance. An insurance agent has no duty to specialist. Because UPS Capital held itself Murray proposed it create a per se rule affirmatively advise an individual seeking out as having expertise, it had a duty to imposing a heightened duty of care for insurance about different or additional inform Murray of the basic coverage details all specialized agents/brokers. coverage. There is no fiduciary duty to (1) of the insurance policy. make available to them a particular kind of While the appellate court declined insurance, (2) advise them of the availability The trial court granted UPS Capital’s motion to institute such a rule, it concluded of such coverage elsewhere in the industry, for summary judgment and dismissed the public policy supports the creation of a or (3) advise them of inadequacies in lawsuit, concluding California law is well reasonable inference of expertise when coverage of which plaintiffs should, as settled as to the limited duty of insurance there is evidence the agent specializes in reasonable persons, have themselves brokers, which is only to use reasonable a particular field of insurance. been aware. care, diligence, and judgment in procuring the insurance requested by an insured. The undisputed evidence of UPS Capital’s However, an insurance agent may assume specialization, in addition to Murray’s a greater duty to the insured when one of Murray contended the trial court erred other evidence, created a triable issue of the following three exceptions arise: (a) the because he presented facts establishing material fact that, if found true in Murray’s agent misrepresents the nature, extent or UPS Capital owed a heightened duty to favor, would show UPS Capital assumed a advise Murray that All-Risk insurance was special duty to advise Murray about the continued on page 10 Spring 2021 Page 9
Wyatt – continued from page 9 scope of the coverage being offered or provided, (b) there is a inquiry), Murray’s evidence raised a triable issue of material fact request or inquiry by the insured for a particular type or extent regarding application of the third exception (holding itself out of coverage, or (c) the agent assumes an additional duty by either as having expertise). express agreement or by holding himself out as having expertise in a given field of insurance being sought by the insured. The case was remanded to permit a jury to resolve the triable issue of material fact as to whether UPS Capital was holding itself Whether a duty of care exists is a question of law for the court. out as having expertise in a specialized area of insurance, and Also, whether, and the extent to which, a new duty is recognized therefore, assumed a heightened duty of care. is ultimately a question of public policy. Any extension of the existing exceptions or creation of a new duty is ultimately a LESSONS: question of public policy. 1. The duty of insurance brokers/agents is limited to those found in any agency relationship such as reasonable care, diligence, The appellate court found no case law specifically defining the and judgment in procuring the insurance requested by an phrase “holding themselves out as having expertise,” but it insured. discussed the factors that should be considered when applying this exception, as discussed in the 1997 decision in Fitzpatrick. 2. An insurance agent may assume a greater duty to the insured when one of the following three exceptions arise: (a) the agent The Fitzpatrick first of three exceptions, when the agent misrepresents the nature, extent or scope of the coverage misrepresents the nature, extent or scope of the coverage being offered or provided, (b) there is a request or inquiry by being offered or provided, was based on the court‘s analysis of the insured for a particular type or extent of coverage, or (c) the three cases: Nacsa – agent misrepresented policy provided full agent assumes an additional duty by either express agreement coverage to replace business personal property in case of total or by holding himself out as having expertise in a given field loss; Desai – agent misrepresented insured getting 100 percent of insurance being sought by the insured. replacement cost coverage with real property insurance policy; and Free – homeowner specifically inquired if coverage limits Craig B. Forry, Esq., FORRY LAW GROUP, (818) 361-1321 ForryLaw@ adequate to rebuild home. Aol.com. The second exception, when “there is a request or inquiry by the insured for a particular type or extent of coverage”, was based on Westrick, where an insurance agent failed to disclose facts about immediate coverage for a recently purchased truck in response to a specific inquiry about coverage. The court determined the agent had a duty to explain a limiting provision to the insured because the insured made prior inquiries regarding coverage of a welding truck under his existing policy and the agent had superior knowledge of the scope of the policy’s automatic coverage clause. The third exception applied when “the agent assumes an additional duty by either express agreement or by ‘holding himself out’ as having expertise in a given field of insurance being sought by the insured. The appellate court concluded in Murray that neither case authority nor public policy support creation of a per se rule regarding specialists, but rather courts must utilize a totality of the circumstances approach. Evidence of specialization at a minimum creates a presumption the agent/broker anticipates their clients will rely on their acknowledged expertise, and supports courts imposing an extended duty. While UPS Capital’s evidence adequately refuted application of the second exception (applicable when there is a request/ Page 10 Spring 2021
Odell Murry MAI Financial Services, Inc. Can Private Money Fuel the Recovery Once Again? As the Pandemic Retrenches, Private Money Steps Up n comparing the 2020 COVID -19 during late fall and early winter. Since then lenders to once again “Save the Day,” as the Pandemic to the Great Recession of rent prices have already begun to climb private lending industry did so admirably 2007, there are some major differences, again, but it is still too soon to tell if that in 2007 and 2008. but some similarities. During the Great rally will be sustainable without continued Recession of 2007 institutional lenders government intervention. Collapse of Employment were quick to batten down the hatches, the The unemployment figures have been dire, money stopped flowing, and the resulting It can be said that the federal government as whole sectors of the service economy hasty retreat of institutional lenders allowed certainly has intervened more quickly were paused or diminished because of private lenders to get involved to keep in this case than in the Great Recession. COVID-19 lock-down policies. In April the gears of the real estate sector of the The Federal Reserve swiftly dropped the 2020, the U.S. unemployment rate peaked economy from locking up completely. As Federal funds rate to near-zero, resumed at 14.7%, and it has only scaled down to traditional lenders backed away, private programs to purchase massive amounts 6.4% in January 2021. As we all know, those lenders seized the moment and stepped of securities, backstopped money market numbers likely are worse among people of in to fill the void. mutual funds, and vastly expanded color and women, who economists say are the scope of its repurchase agreement bearing the brunt of this economic disaster. Today’s economic indicators and the mood operations. Congress approved a $1.8 may feel reminiscent of the lead-up to the trillion package on March 27, 2020, which Even a short-term interruption in employ- Great Recession of 2007. Like with that included $500 billion in direct payments to ment can have disastrous consequences economic disaster, the stock market has Americans, $208 billion in loans to major on credit scores for some potential home- remained stubbornly strong throughout industries, and $300 billion in Small Business buyers, as bills become past due. If federal the COVID-19 pandemic, despite concerns Administration loans. Nine months later, recovery programs fail to keep pace with of a record number of people out of work. a $2.3 trillion spending package, which economic need, the credit picture for many The lock-down has hampered much of included a second round of stimulus, was home-buyers, at least with institutional regular economic activity, but at the same signed into law. lenders, may grow even murkier. time, it has led to record levels of personal savings. At the start of 2021, there are The question is, what happens if the markets Reshaping of the Real Estate Sector some 10 million Americans behind on their perceive that government funding dries up, We are likely to see a dramatic reshaping rent and mortgages, and it appears that or that the funding provided simply isn’t of the real estate outlook, and it may have government programs are the only thing enough to stave off calamity? Institutional real ramifications for institutional and preventing a massive crisis in the housing lenders do not manage upheaval the way private lenders. Office, retail, vacation, and market, but that crisis showed signs of that private lenders can. As a result, the hospitality real estate all saw a significant bubbling up to the surface as indicated by opportunity for private lenders may be falling rental prices in pricey coastal metros here again. It may then be up to private continued on page 12 Spring 2021 Page 11
Recovery – continued from page 11 dip in value in 2020, and the bottom for the Great Recession was devastating for the These are indeed turbulent times, and it is that dip isn’t predicted to come for some real estate market, it was private money – impossible to predict fully what the close of time, according to a recent Bloomberg gathered from private individuals, pension 2021 will look like in the economy or the U.S. News Report. Also, people are rethinking funds, IRA’s, and other private investors – real estate market. What we can say with where they are living and working, both which proved a source of key capital during some confidence is that history has shown because of the pandemic and because the recovery. For example, In 2012, privately that private investors may be the lubricant companies have been forced to realize that funded multifamily property loans in the that keeps the gears of the real estate sector technology allows a dispersed workforce to United States went up 22% over 2011, and from locking up in times of crisis, and they work effectively and, in some cases, more privately funded loans for retail property likely will be called on to play a large role efficiently than they would in an office. increased by 17%. in this latest recovery effort. This means that investments in urban and office real estate, once sure bets, are now Private lenders are able to navigate more Odell Murry is founder and president of MAI on shakier ground. turbulent terrain because their definitions Financial Services Inc., a private-mortgage of risk and success are fundamentally company and institutional commercial All this may spook institutional investors different from traditional mortgage lending. mortgage broker. He is also a board member from putting money down on large-scale Private loans are typically based on the and past president of the California Mortgage projects. However, there may be a need amount of equity in a property, rather than Association. Murry originates institutional for more small-scale lending for housing in on the borrower’s individual credit score, and private-mortgage loans on apartments, the suburbs and rural America, as people for example. And private investors are industrial, retail and most other income- flee to places with more space and are no more concerned with seeing a solid plan producing commercial real estate. He also longer tied geographically to their jobs. for a good rate of return on investment serves as chairman of the National Advisory than with credit scores, and that may lead Board of the University of Massachusetts Filling the Void them to find good investments when W.E.B. Du Bois Center. You can contact Odell Private lenders have proven they can step institutional investors turn their back on Murry at OMurry@MAIFunding.com or (866) in when institutional lenders waver. While certain borrowers in the real estate market. MAI-FUND. Page 12 Spring 2021
Zachary J. Fiene, Esq. T. Robert Finlay, Esq. Wright, Finlay & Zak, LLP Wright, Finlay & Zak, LLP Am I a “Debt Buyer?” Understanding the New Wave of Debt Buyer Statutes and Their Impact on Servicing Non-Performing Mortgage Debt T he financial goal of every debt buyer consumer debt incidental to the purchase • Cal. Civ. Code 1788.58: is uniform – maximize your return of a portfolio predominantly consisting of This section creates a template for on investment. As the debt buying consumer debt that has not been charged what must be included in the creditor’s marketplace expands, states are enacting off. “Charged-off consumer debt” means complaint. laws to regulate the industry and protect a consumer debt that has been removed consumers. The only thing more damaging from a creditor’s books as an asset and • Cal. Civ. Code 1788.60: to your bottom line than a poorer than treated as a loss or expense. This section is a roadmap for how and expected return on a purchased debt is when you can default the borrower when finding yourself in a lawsuit where your This new law sets new requirements to be they fail to respond to your lawsuit. exposure is in the tens of thousands of mindful of when attempting collection on dollars because you unknowingly violated a charged-off loan. • Cal. Civ. Code 1788.61: a new state law. California and Texas are This section gives borrowers who are two states who have recently passed • Cal. Civ. Code 1788.52: defaulted, fairly wide latitude to seek “debt buyer statutes” aimed at companies This section fairly painstaking tells to set aside default judgments. purchasing charged-off debt on the you what must be included in your secondary market. This article explores communication with the borrower and • Cal. Civ. Code 1788.62: the impact of those laws on debt buyers, should be followed to the letter. This section lays out all the different the potential applicability to residential categories of damages a borrower mortgage debt and things to be on the • Cal. Civ. Code 1788.54: might sue for violations of the foregoing lookout for. This section ensures if you reach a sections. settlement or workout with the borrower California Fair Debt that it is reduced to writing and if they At this point, there does not appear to be Buyers Practices Act: make payments under that agreement, clear guidance on whether the California On January 1, 2014, California’s Fair Debt that within 30 days of receipt, they must law will apply to mortgage loans. The laws Buying Practices Act (“FDBPA”), Civil Code be sent a statement that shows the itself doesn’t purport to but is essentially § 1788.50, et seq. took effect. Under this amount paid, remaining balance, among silent. Because the laws is relatively new, law, “debt buyer” means a person or entity other things. there are no appellate level cases that that is regularly engaged in the business of have evaluated the issue yet, but the purchasing charged-off consumer debt for • Cal. Civ. Code 1788.56: expectation is that before long, someone collection purposes, whether it collects the This section states that you cannot sue a will challenge it and an appellate Court debt itself, hires a third party for collection, borrower if the statute of limitations has will come down with a decision. The or hires an attorney-at-law for collection expired. If you do, the section gives the conservative approach is to make sure you litigation. “Debt buyer” does not mean a borrower the right to recover damages, person or entity that acquires a charged-off as discussed more below. continued on page 14 Spring 2021 Page 13
Debt – continued from page 13 comply anyway, however, the law seems to • Thus, it appears that the “debt buyer” • The Oregon law also prohibits a debt have a greater impact on older, consumer definition is intended only to cover buyer from bringing an action against debt with poor documentation and most purchasers of portfolios of charged-off or initiating arbitration with a consumer real estate loans hopefully will include debt rather than purchasers of portfolios for the purpose of collecting a consumer most of, if not all of the information and consisting primarily of current debts. debt after the statute of limitations has documentation needed to comply with the expired. The law specifies the notice law. The other requirements are probably • The bill prohibits a debt buyer from that a debt buyer must give to a debtor best practices anyway when seeking to commencing an action against or as well as the documents the buyer must enforce a charged-off loan in CA. We are initiating arbitration with a consumer give upon request. seeing more and more cases where the for the purpose of collecting a consumer borrower files suit to avoid a HELOC or 2nd debt after the statute of limitations has • The law requires those who engage loan that they thought was charged-off expired. It provides that if a collection in debt buying in the state to obtain a years ago. The last thing the collecting action is barred by this prohibition, license from the Director of Department creditor wants is an actual violation of the the cause of action is not revived by a of Consumer and Business Services. The FDBPA turning an investment into a loss. payment or oral or written affirmation director has authority to order a debt of the consumer debt. buyer to cease and desist from violating Texas Debt Buyer Statute: this law, impose civil penalty or take Texas has also enacted a law that pretty • If a debt buyer is attempting to collect other action to remedy such a violation. closely follows the California equivalent. a debt for which a collection action This law is even newer than CA – it has only is barred, the debt buyer or a debt Washington Debt-Buyer Statute: been around since 2019, so at this point, collector acting on the debt buyer’s Washington state has also enacted a debt- we just don’t know how Texas Courts will behalf must provide a specified notice buyer law. The Washington law passed interpret the law and whether Courts will in the initial written communication with in 2020, so it is the most recently passed conclude it applies to residential mortgage the consumer. The content of the notice debt-buyer statute of the four discussed in debt. varies depending on whether the FCRA this article. Since the law just took effect in time period for reporting the debt at the middle of last year, Washington courts On June 14, 2019, Texas amended Chapter issue has expired and whether the debt have had even less time to interpret the law 392 of the Texas Finance Code dealing buyer furnishes information about the with regard to residential mortgage debt. with debt collection. The amendments debt to a consumer reporting agency. are effective September 1, 2019. On March 18, 2020, Washington amended Oregon Debt-Buyer Statute: Chapter 19.16 of the Revised Code of • The bill defines a “debt buyer” as “a Oregon is another state that has enacted Washington Annotated (“RCWA”) dealing person who purchases or otherwise a debt-buyer law that similarly follows the with collection agencies. The amendments acquires a consumer debt from a creditor California and Texas statutes. The Oregon became effective June 11, 2020. or other subsequent owner of the law passed in 2017, just three years after consumer debt, regardless of whether the California equivalent took effect. Like • The Washington law defines “debt buyer” the person collects the consumer debt, the newer Texas statute, Oregon courts similarly as the three previous states hires a third party to collect the consumer have not had long to interpret the law except that it explicitly states that an debt, or hires an attorney to pursue with regard to residential mortgage debt. entity may also be a debt buyer. collection litigation in connection with the consumer debt.” On August 10, 2017, Oregon amended • Unlike the previous debt-buyer laws, the Chapter 646 of the Oregon Revised Washington statute does not exclude • Excluded from this definition is “a person Statutes dealing with debt collection. The from the definition buyers who acquire who acquires in-default or charged-off amendments became operative January charged-off debt as an incidental part debt that is incidental to the purchase 1, 2018. of acquiring a portfolio of debt that is of a portfolio that predominantly predominantly not charged-off debt. consists of consumer debt that has not • The Oregon law shares with California The law also does not define “charged- been charged off.” “Charged-off debt” and Texas similar definitions for “debt off debt.” is defined as “a consumer debt that a buyer” and “charged-off debt.” It also creditor has determined to be a loss or similarly excludes persons who acquire • Therefore, a person that acquires expense to the creditor instead of an charged-off debt as an incidental part charged-off debt, regardless of whether asset.” of acquiring a portfolio of debt that is the charged-off debt is incidental to predominantly not charged-off debt. continued on page 15 Page 14 Spring 2021
Debt – continued from page 14 or the primary focus of the acquired The Oregon, Texas, and Washington to a specific loan, please do not hesitate to portfolio, may fall under the Washington statutes are all remarkably similar to the contact Robert Finlay at rfinlay@wrightlegal. statute definition of a “debt buyer.” California law. The expectation is that net. Court’s will soon clarify the applicably to • Like all previous debt-buyer statutes, residential mortgage debt, which will allow Disclaimer: The above information is the Washington law prohibits debt debt buyers to revise their due diligence intended for information purposes alone buyers from bringing an action against and collection processes. The bigger and is not intended as legal advice. Please or initiating arbitration with a consumer question is whether even more states will consult with counsel before taking any for the purpose of collecting debt after follow California’s lead, as they so often do, steps in reliance on any of the information the statute of limitations has expired. and establish their own Debt Buyer statute. contained herein. • The law prohibits debt buyers from Takeaways: Zachary Fiene is an Associate Attorney at commencing legal action against 1. Prior to buying a pool that consists WFZ’s California office. Robert Finlay is a a debtor without attaching to the predominantly of charged-off consumer founding Partner of WFZ. complaint a copy of the contract or other debt, consult an attorney to determine writing evidencing the original debt that whether any of the states where the debt contains the debtor’s signature. The law is located have debt buyer statutes; and also lists a number of disclosures a debt buyer must give to the debtor when 2. Prior to reaching out to collect any newly commencing legal action. purchased charged-off consumer debts, consult counsel to make sure you are • Washington also prevents debt buyers complying with the applicable debt from seeking default judgments on the buyer laws. debt unless they establish that they are owners of the debt amongst several If you have any questions regarding these other conditions. debt buyer statutes or how they may apply Spring 2021 Page 15
SUMMER SEMINAR San Diego Mission Bay Resort July 29-30, 2021 SAVE THE DATE! Page 16 CMA Summer Seminar • July 29th - 30th, 2021 Spring 2021 Register Online at www.CaliforniaMortgageAssociation.com
CMA Thanks Our Annual Sponsors — Silver Sponsor — CMA Thanks Our Virtual Spring Seminar Sponsors — Platinuim Sponsors — — Gold Sponsors — — Silver Sponsors — Spring 2021 Page 17
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DONATE TO THE CMA PAC TODAY! CMA’s positive influence is crucial for our survival. Send your contribution today! $75,000 It’s easy to donate: Goal Online at www.californiamortgageassociation.com — or — Send the additional amount with your monthly CMA dues $41,753 raised so — or — far since Write a check to “CMA PAC” and send it today to: July 1, 2020 2520 Venture Oaks Way, Suite 150 • Sacramento, CA 95833 PROTECT YOUR INDUSTRY – CONTRIBUTE TODAY! For more information contact: Richard Wachter, Chairperson, CMA PAC Fundraising Committee 1-800-308-4961 Our PAC and our advocates in Sacramento always operate in full compliance with all laws and regulations relating to efforts to influence the public policy process. We would never engage in any type of quid-pro-quo on public policy issues or entertain contributions in return for access. We support legislators who are philosophically aligned with the interests of our membership and who work to ensure a business environment which allows our members to flourish. Spring 2021 Page 21
PAC Contributions from July 2020 - March 2021 $2,000 – $7,300 $1,000 – $1,999 continued $500 – $999 continued Fidelity Mortgage Herzer Financial Services, Inc. Private Lender Link Redwood City Redwood City Lenders, Inc. Spiegel Accountancy Corp. Los Angeles LBC Capital Income Fund Pleasant Hill North Hollywood Sun Pacific Mortgage PLM Lender Services, Inc. Mortgage Vintage, Inc. Santa Rosa Campbell Newport Beach Val-Chris Investments, Inc. Selzer Home Loans ReProp Financial Irvine Ukiah Eureka Woodland Hills Mortgage Corp Woodland Hills Stonecrest Financial Standard Mortgage Financial Services Inc. To view this member-only content, San Jose Riverside $200 – $499 A.C.M. Investor Services, Inc. Wachter become Investments, Inc. a member of CMA $500 – $999 Larkspur Action Funding, Inc. Burlingame Anchor Loans, Inc. Calabasas Thousand Oaks Allstar Financial Services, Inc. $1,000 – $1,999 Buchalter Woodland Hills Los Angeles Abundance Capital Asher Evan Investments Carmichael Milpitas Casco Financial Los Gatos Bay Laurel Financial Cushman Rexrode San Carlos Capital Corporation Creative Realty Marketing & Mortgage Budget Mortgage Corp. Oakland Los Angeles Bakersfield Empire Trust Deed Equity Wave Lending JMJ Financial Group Woodland Hills Irvine Garden Grove Hamilton Ridge Law Office of Asset Management FCI Lender Services, Inc. San Jose Anaheim Hills Benjamin R. Levinson, APC Campbell Lantern Financial Corp. Sherman Oaks F.E. Forbes Company Inc. MAI Financial Services, Inc. Berkeley Toluca Lake continued on page 23 Page 22 Spring 2021
PAC Contributions from July 2020 - March 2021 $200 – $499 continued $20 – $199 continued $20 – $199 continued Mid Valley Services, Inc. E.F. Foley & Co., Inc. Sequoia Mortgage Capital, Inc. Fresno San Jose San Anselmo Federal Home Loans Corp. Stadia Capital Group Mortgage Securities Inc. San Diego El Dorado Hills Encinitas James Baron Sunset Mortgage Mortgage+Care Saratoga Mission Viejo LOAN SERVICING SOFT Inc. Mortgage Lender Services, Inc. The Argus Group San Juan Capistrano Fair Oaks Woodland Hills North Coast Financial, Inc. Murphy Austin Adams Schoenfeld LLP The Helvetica Group Carlsbad Sacramento Carlsbad National Equity Funding, Inc. The Norris Group Pacific Capital Loans, LLC Irvine Riverside Calabasas NDetail Capital LLC Total Lender Solutions, Inc. To view this member-only content, Private Mortgage Fund, LLC Newport Beach San Diego Calabasas Trilion Capital Pacific Capital Funding Corp. Calabasas San Diego Residential First Mortgage become a member of CMA Newport Beach Unitrust Mortgage, Inc. Pivotal Capital Group II, LLC Ladera Ranch PrideCo Capital Management, LLC Valley Mortgage Investments, Inc. Bakersfield Wilshire Finance Partners, Inc. San Diego Newport Beach Newport Beach Watsonville Mortgage Private Capital Investments Wright, Finlay & Zak, LLP Watsonville Danville Newport Beach Woody Financial Realty Corp. Private Financial, Inc. Sherman Oaks Long Beach Redwood Mortgage Corp. PAC $20 – $199 San Mateo Redwood Trust Deed Services, Inc. Announcements Santa Rosa A.S.K. Investments, Inc. • AirPods: Anaheim S&L Capital Group Boris Dorfman & Sandy MacDougall Brea Agricultural Finance San Juan Capistrano Select Mortgage • Apple Watch: Calabasas Shafiq Taymuree Applied Business Software Long Beach Bench Equity, LLC Mesa Dryden Capital Inc. Novato Duner and Foote Irvine Spring 2021 Page 23
Donna Muratalla Genworth Mortgage Insurance Got Solar? Questions to Ask When Underwriting a Home with Solar Power olar power is gaining momentum in Questions to Ask When Originating or Does the home maintain access to the U.S., and we’re moving towards Underwriting a Home with Solar Power electrical utilities consistent with incorporating this cleaner, more When your borrower is considering community standards? efficient source in many areas of our lives, purchasing or refinancing a home with This answer must be “yes” in this case. including our homes. solar panels, there are some specific questions you’ll want to ask upfront. Is there a Property Assessed Solar energy technology has come a Clean Energy (PACE) loan? long way in the last 100+ years: solar cell What is the ownership and debt If the PACE loan is structured as a technology was first produced in the late financing structure of the solar panels? subordinate lien or unsecured loan, it 1800s, and solar panels as we know them If the borrower owns, or will be the owner may be GSE eligible. If the PACE loan is today were created in 1954. Solar power of the solar panels (cash purchase; included not expressly subordinate, it is ineligible. has been part of some amazing feats, in the purchase price; financed previously PACE loans dated prior to July 6, 2010, may including the first round-the-world solar- and now paid in full OR secured by the also be eligible. Got to https://selling-guide. powered flight in 2016 and the construction first mortgage) you will typically be able fanniemae.com/Selling-Guide/Origination- of the largest solar-powered railway bridge to verify via title and solar-related credit thru-Closing/Subpart-B5-Unique-Eligibility- in London, England. report debt. The solar panels may be Underwriting-Considerations/Chapter-B5- included in the value. 3-Construction-and-Energy-Financing/ for The good news is solar power has become more information. more accessible to the average consumer, Are the panels leased and more homeowners are incorporating or owned outright? Is the Solar Panel loan unsecured? solar panels into their homes. In the U.S., You will want to obtain a copy of the Power If so, obtain the invoice to verify solar California is leading the pack with over one Purchase agreement or lease agreement. panels were installed at the subject million solar units installed in homes as of If you’re looking at a property with leased property site. 2019. This number is growing, especially panels, the value of the panels may not be with California legislation requiring most included in the appraised valuation. Check the Appraiser’s Requirements new construction homes, built January In addition to the above questions, you’ll 2020 and onward, to incorporate solar Further, if the panels are leased, you’ll want to ascertain the appraiser has energy measures. Many states have need to determine the monthly payment accurate information about the ownership incorporated solar power into their amount and incorporate that amount structure of the solar panels to: legislation, as well. into the ratios unless the lease provides delivery of specific amount of energy at • Review the complete contract and Whether you’re originating or underwriting a fixed payment during a given period comment on the terms loans in California or other states with and has a production guarantee that a strong solar power presence, there compensates the borrower on a prorated • Be familiar with energy reports and are some questions to consider when basis in the event the solar panels fail to ratings and include the information in gathering data during the processing of meet energy output required during the the report the file. lease period. continued on page 25 Page 24 Spring 2021
Solar – continued from page 24 • Provide comparable sales to support, if available • If no similar sales are available, the income approach, cost analysis, discounted cash flow or market surveys may be appropriate. Be Flexible When Underwriting the Collateral One final recommendation is to remain open-minded when considering appraisals that may lack solar panel comparable sales. Some markets just may not have sales with similar energy sources during this time of solar growth. If you have any questions regarding underwriting properties with solar panels, or other interesting scenarios, please reach out to your Genworth Regional Underwriting team to discuss them. We’re always happy to assist you! Donna Muratalla is Genworth Mortgage Insurance’s Pacific Northwest Regional Underwriting Manager. She is a Certified Residential Underwriter with 28 years in the MI industry. She specializes in HFA and Risk review. Spring 2021 Page 25
Donald Hensel T he California Mortgage Association turns the spotlight on members who are making an impact in their professional field and around the Association. These members exemplify the mission of the CMA. We know that our members are one of the most important aspects of this Association, and we work hard to feature outstanding members. This quarter, the California Mortgage Association turns the spotlight on member Donald Hensel, President of North Coast Financial located in Oceanside, California. Donald has been a member of the California Mortgage Association since its inception. In addition to being a longtime member, he has also volunteered his time to many CMA committees, seminars, and panels. He Angelica was on the Summer Seminar Committee when it was formed 10 years ago and was a panelist or moderator Gardner at each of those summer seminars. Donald has also served on the Nomination Committee, which he was the Asher Evan chair twice, the Bylaws Committee, and he is currently on the Consumer Lending Focus Group Committee. Investments We are grateful to have Donald as a member and are excited for our members to learn more about him. Q Tell us a little about you, your family, hobbies, etc. Q What do you do for work? What is your typical day like? A After growing up in Illinois and graduating from the University of Illinois and Northwestern (MBA), I started A Since I am involved in every aspect of the business, my day includes everything from loan negotiations, processing and my career at Procter and Gamble. In 1978 document preparation to loan servicing and they made the mistake of transferring me customer relations. My typical day involves to California and I never went back. My wife setting priorities on whatever tasks need to (Anne) and I live in Oceanside and my son be done that particular day and making sure (Jeff) lives in San Diego. I love to bike ride, they get accomplished. The top priorities play golf and play pickleball. For the last 30 are always progressing loans towards closing years, I have been the treasurer of our youth and the timely disbursement of payments soccer club in Oceanside. I am an amateur to lenders. Fortunately, my son Jeff joined woodworker and I am also a registered tax the company six years ago which has been professional which keeps me busy during tax season. continued on page 27 Page 26 Spring 2021
Hensel – continued from page 26 a great benefit to our business. Much of my fiduciary duty to both the lender and clients in person, the biggest change for me day is on the phone with him since the two borrower and our reviews show it. It’s not is that my business casual attire at work has of us are the loan committee. unusual for us to spend time helping a changed to just causal! borrower find a solution to their problem even after we have decided not to approve their loan request. Treating borrowers and lenders with the time and respect that they Q Describe your idea of a perfect day. Where would you be? Who would you be with? What would you be doing? desire can be time consuming but it pays dividends in the end. A My perfect days are during my annual vacation in Hawaii with my wife. I spend Q How long have you been a member of the CMA? Why did you join the CMA? an hour or two responding to emails and other work matters and then a full day of fun and relaxation. A I joined CIMBA (California Independent Mortgage Broker Association) in the mid-’80s primarily for the educational seminars. I was a founding member of CTDBA (California Trust Deed Broker Association) and was on the Board of Directors. As a member Q How did you find yourself working in this industry? Was it love at first sight or a longer path? of that board, I worked on the merger with another mortgage association to form CMA. I highly value the education, networking and relationships that I have developed through A After P&G moved me to Northern California, I started to talk with my college roommate who had moved to the these organizations. My actions speak louder than words. In 35 years I have missed only one educational seminar and that was because it San Diego area to join a relative in the hard conflicted with my honeymoon. I made the money lending business. I had a strong right choice missing that seminar! interest in real estate and my education was in finance so hard money lending was very intriguing to me. Long story short, I moved Q Knowing that you have attended many CMA seminars, what is one Q What is the last app you downloaded on your phone and why did you download it? to Southern California to join that business thing you look forward to the most at and then later started my own business. each event? A I downloaded a golf app that is connected to my clubs. Since my clubs Q Who is your ideal/target customer? A I can’t pick just one thing. The education through the seminars is invaluable as have GPS sensors, after a round I can review every shot including the club used and the A We are always looking for any borrower with good collateral along with a reasonable loan request and exit strategy. well as learning new ideas (and mistakes to avoid) when talking with other members. Being with life-long friends and meeting distance hit. Non-golfers will think “so what?” Golfers will think “that is cool!” We need to utilize technology to our benefit in both We lend throughout the state but we avoid new people is a highlight of every seminar. work and play. rural areas. Since we are NMLS licensed, we do a significant volume of consumer loans. Our favorite consumer loan is a bridge loan to someone who has significant equity in Q Since the COVID-19 stay at home order was implemented, how has your work been impacted by the their current residence and needs cash to shutdown/economy? purchase a new residence. Q What sets your company apart from others? A When the shutdown hit, we kept busy with the existing pipeline. After the initial “deer in the headlights” moment passed, we began to realize that the California A Since our slogan is “Our Professional- ism Sets Us Apart,” I would say professionalism. We take seriously our real estate market was mostly not impacted by COVID and our business has continued strong. Since I am currently not meeting with Spring 2021 Page 27
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